Frequently Asked Questions
The Event Study
What is an event study and how does SAR apply it?
SAR relies on the event study methodology to identify corporate disclosures that lead to an Adverse Corporate Event. The applied event study is an econometric analysis that measures the economic impact of corporate disclosures on common stock of public companies that trade on the NYSE or NASDAQ. An event study is a time series analysis that applies a two-factor statistical regression based on parameters accepted in complex securities litigation across the Federal Judiciary. SAR performs an event study for every publicly traded company at the close of trading to test whether a corporate disclosure constitutes an Adverse Corporate Event according to the results of the company and time-specific event study analysis.
Why is an event study important to evaluate the securities litigation risks of a corporate disclosure?
An event study is a critical econometric tool that is used by expert practitioners to rule out whether the decline in stock price was due to a corporate disclosure or external factors affecting the equities market or sector. An event study is instrumental to more accurately assess the magnitude of the decline in stock price in response to a corporate disclosure without the economic impact non-company specific factors. At the close of trading, SAR conducts an event study for publicly traded companies in the NYSE or NASDAQ to determine whether the decline in stock price in response to a corporate disclosure over close-to-close event window, is statistically significant at the 95% confidence standard after accounting for the economic impact of the general equity market and corresponding sector. Stock price performance that controls for extraneous factors is a critical data point to evaluate the securities litigation risk of a publicly traded company by applying the same methodology submitted to the Court in complex securities-fraud litigation.
Who relies on an event analysis and why are they important?
Federal courts rely on the event study methodology to determine whether a defendant is liable for alleged violations of the federal securities laws by materially mispresenting corporate disclosures with investors and distorted the price common stock. For over three decades, event studies are routinely relied on by the Federal Judiciary on securities claims that alleged violations of the federal securities laws under Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities Exchange Commission (SEC) Rule 10b-5. Federal courts also rely on event studies to assess whether the price of a defendant’s publicly-traded security reacted to new and material corporate disclosures. Mediators look to event study results to assess the magnitude of damages per share that may be due to a certified class of investor plaintiffs that are suing a corporation for alleged securities fraud.
Adverse Corporate Event (ACE)
What is an Adverse Corporate Event (ACE)?
An Adverse Corporate Event is a single-day event when the economic impact of a corporate disclosure is statistically significant at the 95% confidence standard based stock price performance relative to the general equity market and the participating industry sector. SAR tracks all corporate disclosures of companies listed on the NYSE and NASDAQ and performs daily on-going event study analyses to identify and categorize all Adverse Corporate Events. Based on each company’s frequency and severity of the identified Adverse Corporate Events, SAR assigns an independent score to continuously assess securities litigation risk – the SAR Risk Score℠.
What are the different types of Adverse Corporate Events (ACEs)?
SAR identifies all Adverse Corporate Events and categorizes them into three (3) mutually exclusive categories.
TYPE I ACE: Company issues a public statement via a press release, or a representative discloses information at a press event or conference call, and the economic impact on the price of common stock is statistically significant.
TYPE II ACE: Company files with the Securities and Exchange Commission (SEC), and the economic impact on the price of common stock is statistically significant.
HIGH RISK ACE: Company issues a public statement and files with the Securities and Exchange Commission (SEC) and the economic impact on the price of common stock is statistically significant.
SAR classifies any type of Adverse Corporate Event as Severe when the traded volume on that day exceeds 95% of the reported traded volume during the preceding two years, and deviates from the mean more than two sigma.
What is the SAR Risk Score℠ and how is it computed?
The SAR Risk Score℠ is a proprietary score assigned to every public company listed on the NYSE and NASDAQ according to the frequency and severity of Adverse Corporate Events during a two-year period from the designated evaluation date. The SAR Risk Score℠ is equal to the market capitalization losses observed on High-Risk Adverse Corporate Events divided by the Company’s market capitalization as of the preceding trading day.
For example, assume AnyTime Co., Inc. has a market capitalization of $1 billion. AnyTime Co., Inc. had three High-Risk Adverse Corporate Events during the preceding two years. Each High-Risk Adverse Corporate Event had a $100 million market capitalization loss. Therefore, AnyTime Co., Inc. SAR Risk Score℠ is 30%. A total of $300 million in market capitalization losses divided by $1 billion in actual market capitalization.
A public company with a SAR Risk Score℠ of 100% indicates the market capitalization losses for an organization are equal to or exceed the Company’s actual market capitalization. A SAR Risk Score℠ of 100% indicates a much higher likelihood that the Company’s Adverse Corporate Events may form the basis of a securities action. SAR Risk Scores℠ are capped at 100%.
SAR Platform℠
What is the SAR Platform℠?
The SAR Platform℠ is a proprietary cloud-based, on-demand data analytics solution for corporate customers that seek to license highly specialized data related to the securities litigation risk, exposure, and potential liability of public companies listed in the NYSE or NASDAQ. Customers may license SAR’s independent data by agreeing to be a User of the SAR Platform℠ by executing a SAR Platform℠ Services Agreement. The SAR Platform℠ dispenses licensed SAR data for efficient and multimodal User workflow integration via a visual risk dashboard, a downloadable spreadsheet, and application programming interface (API) for robust and more accurate data analytics.
The SAR Platform℠ houses SAR’s independent data in two cloud-native databases: the SCA Database℠ and the ACE Database℠. Users may choose to license data from either database according to their data analytics requirements. The SCA Database℠ contains SAR’s claim-specific event study results on private securities-fraud litigation class action lawsuits filed in federal court as of June 2018. The ACE Database℠ contains all Adverse Corporate Events of public companies that trade on the NYSE and NASDAQ as of September 2024.
Risk Tool
What is the SAR Risk Tool?
The SAR Platform℠ provides Subscribers in Commercial Insurance with access to a proprietary risk tool used to identify corporate disclosures that constitute an Adverse Corporate Event and attain the estimated risk and corresponding potential loss to optimize securities litigation risk transfer solutions. Please send an e-mail to info@sarlit.com to learn more about the risk tool and evaluate your eligibility.
ACE Alert℠
What is the SAR ACE Alert℠?
SAR offers executive customers an ACE Alert℠ subscription service. The ACE Alert℠ subscription service provides executive and corporate customers with alerts for NYSE and NASDAQ-listed companies when SAR identifies an Adverse Corporate Event based on the event study methodology endorsed by the Federal Judiciary. SAR tracks corporate disclosures of public companies to identify an Adverse Corporate Event by continuously capturing all corporate disclosures and analyzing the impact on stock price performance by applying the court-approved event study analysis. ACE Alerts℠ are dispensed to subscribers prior to the market open on the subsequent trading day from the occurrence of an Adverse Corporate Event.